Hedge-fund manager John Paulson, who made billions wagering against subprime mortgages, has started to profit from a U.S. housing bet that took longer to ripen: owning land.

After acquiring about 35,000 lots since 2009, Paulson & Co. shifted toward selling last year and is accelerating its disposition pace, according to Michael Barr, who manages the firm’s real estate. Paulson’s funds had invested $770 million, mostly in lots bought out of bankruptcies or other distressed sales, and acquired two dozen communities in Arizona, California, Colorado, Florida and Nevada.

“The whole thesis here was that land was the best way to play the housing recovery, and that thesis seems to be playing out,” Mr. Barr said in a telephone interview from New York. “In a downturn, land is the hardest-hit real estate asset. Then, in the recovery phase of the cycle, as home prices appreciate, land values appreciate more.”

Paulson—whose lot holdings put the firm almost on par with the 10th-largest U.S. homebuilder—is planning to slowly sell parcels in some projects where prices have rebounded sharply, while holding on to other properties. He’s joining other large land buyers who are selling into a housing market constrained by lot shortages after almost a decade of anemic construction.

Builders replenishing land holdings are finding that prices for finished lots across the U.S. jumped 57% since the bottom in 2009, according to data from John Burns Real Estate Consulting. In some hard-hit markets where distressed properties lured investors, values have more than doubled in the past six years.

Earlier sellers

Paulson is starting to sell relatively late compared with other firms that bought land after the crash, and price gains are now moderating. His firm’s real estate funds have 10 years to return principal to investors after closing, according to a report prepared for California’s Contra Costa County Employees’ Retirement Association, which invested with Paulson.

“Their competitive advantage is their longer-term horizon,” said John Burns, a housing consultant based in Irvine, California, who has done work for Paulson. “They were able to bid on land that most people thought would take a long time to recover, so there were very few bids on it.”

Angelo Gordon & Co., a New York-based firm with $27 billion under management, has sold or optioned about 80% of the 14,000 lots it acquired from 2008 to 2012, according to Louis Friedel, vice president of real estate acquisitions. Starwood Land Ventures, a unit of Barry Sternlicht’s Starwood Capital Group, has sold about half of the 20,000 lots it acquired since 2007 in California, Florida, Arizona and Colorado, Chief Executive Officer Mike Moser said.

Land ‘convexity’

GTIS Partners, which spent about $1 billion since 2009 to buy more than 35,000 lots in 27 markets, has been selling for double or quadruple the price it paid, said CEO Tom Shapiro.

“Land has a lot of convexity to it,” Shapiro said in a telephone interview. “If home prices go up 5 or 10%, land prices can go up 20 or 30%. You have to be careful because it also works on the way down, which is how people got really hurt.”

The housing crash pushed many developers and landowners into bankruptcy, giving investors the opportunity to buy large, unfinished master-planned communities for distressed prices. In 2012, for example, Paulson paid $17 million, or 6% of the outstanding debt, for a post-bankruptcy acquisition of 875 acres (354 hectares) in Lake Las Vegas, Nevada, according to the Contra Costa pension fund report.

That’s less than $20,000 an acre in a market where homebuilders now typically pay $400,000 to $450,000 an acre, said Dennis Smith, CEO of Home Builders Research, a Las Vegas consulting firm. Not all of that increase would turn into profits, because much of the Lake Las Vegas land is set aside for open space and Paulson invested in improvements, such as restoring a golf course.

Slowing gains

Paulson may face risks as prices moderate. Finished lot prices, after jumping as much as 28% in 2013, increased just 2% in the first quarter from a year earlier, according to John Burns Real Estate Consulting. Homebuilders are cutting back on land purchases after “aggressively” spending from 2010 to 2013, Barclays Capital Inc. said in a note this week.

Wheelock Street Capital, which bought 24,000 lots starting around the same time as Paulson, has been a steady seller, said Dan Green, principal at the real estate private equity firm.

“We wanted to get in and buy and enjoy the recovery and not hold until the top” of the market, Mr. Green said.

Builder expansion in locations further from urban areas may fuel demand for the types of lots Paulson owns. The new-home market is expected to grow over the next two years, Susan Maklari, an analyst with UBS Group AG, said in a note to clients Wednesday.

“The housing market is in the process of moving to more volume-based growth, driven by the re-emergence of the entry- level buyer,” Ms. Maklari wrote. “This reflects increasing construction activity further in the periphery, where it is easier for supply to meet demand.”

Master-planned communities can take years to liquidate. Paulson’s first targeted disposition locations include Belmont and Triple Creek in the Tampa, Florida, area; Southshore at Aurora and Crystal Lake outside of Denver; and Lake Las Vegas.

“It’s not because it’s time to get out, but because you’ve got to start to sell these larger, longer-term assets,” Mr. Barr said. “We still think we’re mid-cycle in most of our markets.”

South Korea’s biggest funds are hoping to get returns from Manhattan eluding them in Seoul.

Korea Post is the latest money manager from the nation to set up shop in New York to find real estate, private equity and hedge fund investments and may hire more people, its U.S. representative Chuljoong Jurng said. It follows National Pension Service and Korea Investment Corp., which have similar offices, chasing better returns from global alternative assets amid low yields at home.

Four interest-rate cuts over the past year haven’t been able to revive South Korea’s economy, which is growing at the slowest pace in two years. The record-low benchmark has stifled returns on bonds, with the government’s 10-year yield shrinking to its lowest ever in April. National Pension Service helped buy a Swedish shopping mall this year, while Shinhan Life Insurance Co. and Hyundai Marine & Fire Insurance Co. helped underwrite a $220 million loan to buy a Manhattan office tower. The buying spree follows similar moves by Chinese investors to park their dollars in New York real estate.

“With the continued low interest rates, it’s inevitable we’ll need to increase alternative investments to boost returns,” Mr. Jurng said. “As our assets under management keep growing, it’s become more important to get access to information and global investment trends for higher returns.”

Global hunt

State-run Korea Post, which oversees 106 trillion won ($89 billion), wants to diversify from stock and bond investments into other sorts of assets, Mr. Jurng said. He expects the new Manhattan office to improve deal sourcing and global research capabilities to help find such opportunities abroad.

Stocks and bonds are less reliable as hedges against each other, according to Kim Eun Gie, a Seoul-based alternative investments analyst at NH Investment & Securities Co. While the securities’ prices have usually been negatively correlated, they’re now moving in unison due to global monetary easing and that’s curbing the effects of diversifying, he said.

Korea’s asset managers have taken note. Their real estate holdings have surged 38% since the end of 2013 to 33.6 trillion won, Korea Financial Investment Association data show. Private equity funds raised 51.2 trillion won at the end of 2014 compared with 44 trillion won a year earlier, according to Korea’s Financial Supervisory Service.

“There aren’t enough alternative assets at home, forcing investors to look abroad,” NH Investment’s Kim said. “Unlike bonds or stocks, alternative investments are typically private, so it’s become essential to open overseas offices to broaden access to information.”

Getting older

Combined assets under management at Korea’s life insurance companies have almost doubled to 537 trillion won as of March 31 over the last five years as people save for retirement. By 2060, the elderly—defined as anyone over 65-years old—will make up 40 percent of the population, Statistics Korea data show.

Alternatives were the best-performing asset class last year for National Pension Service, South Korea’s biggest investor with 470 trillion won of assets. They returned 12.5%, which compared with a 5.25% overall gain. The fund plans to boost holdings of such assets to 11.5% by the end of next year from 9.9% at the end of 2014, it said in June.

National Pension Service, which has both London and New York offices, will also officially open a Singapore location in September to find Asian alternative opportunities, spokeswoman Hwang Ji Hye said.

Big role

“Overseas offices are playing a role in gathering new information and looking for valuable investment opportunities,” said Mr. Hwang. “We’ve been preparing for opening an office in Asia following the New York and London offices to build a strong overseas network.”

Korea Investment Corp., the nation’s $85 billion sovereign wealth fund, plans to almost double its share of alternative investments to 15% by year-end from 8% currently, and aims for 50% over the next five years, Chairman Ahn Hongchul said last month. Ahn expects longer-term returns of at least 10% if holdings rise above half of the portfolio.

It also operates in New York and London, where the focus is on both conventional and alternative assets. The fund plans to send more people from Seoul to those offices, largely to help assess alternative opportunities, said a company official.

“While stocks and bonds are financial assets, alternative assets are real investment, hedging against possible inflation going forward,” NH Investment’s Kim said. “To diversify investment portfolios and boost returns, the alternative investment would be an answer.

One of the city’s largest commercial landlords is mulling a residential project in lower Manhattan.

Vornado Realty Trust, which owns more than two dozen office properties in the city, is considering a residential conversion of either a portion or all of the 27-story, 473,000-square-foot downtown office building at 20 Broad St.

Sources familiar with the decision say Vornado may still choose to maintain the property as an office building rather than repurpose it as apartment space, which would likely cost tens of millions of dollars to create.

Vornado is exploring options for the property because, according to recent reports, the building’s biggest office tenant, the New York Stock Exchange, which leases nearly 400,000 square feet, is set to leave next year.

However, converting the property into residential won’t be easy. It may be difficult to lay out the building’s lower floors, which are larger than the spaces at the top of the tiered property, for apartments, sources said. An even bigger hurdle is the building’s complex ownership structure.

The New York Stock Exchange used to both own and occupy 20 Broad St.. Several years ago it ground leased the property to Vornado, while still remaining a tenant at the building.

Residential condo units are difficult to sell in ground-leased properties because the building’s ownership eventually reverts back to the owner of the ground. Apartment buyers are wary of that arrangement because it means their units will not be theirs in perpetuity and the land may also become less valuable as the ground lease nears expiration.

But now that NYSE is leaving 20 Broad, Vornado could purchase the building outright from NYSE and pursue the conversion. Some say Vornado could tear the existing building down and erect a new residential tower in its place.

Several owners have converted downtown office buildings into residential space or erected apartments from the ground up. Alchemy Properties, for instance, is converting the upper floors of the Woolworth Building into luxury apartments. And last week,  Chinese firm Oceanwide Holdingsreached a deal to purchase 80 South St., a development site that can accommodate a 1,000-foot tall tower with residential space.

Though Vornado is predominantly an owner of office and retail, the firm also has built high-end residential space. The company is developing one of the highest profile condo projects in the city, a nearly 1,000-foot tall tower with soaring Central Park views at 220 Central Park South. Vornado revealed in a recent earnings call that it has sold $1.1 billion worth of apartments in just a few weeks of opening the property to the market.

A Chinese investment firm announced it has agreed to pay $390 million for a development site near the South Street Seaport, paving the way for the erection of yet another super-tall skyscraper in a city that is quickly sprouting 1,000-foot plus tall towers.

The Beijing-based investment company China Oceanwide Holdings released a statement confirming that a U.S. subsidiary of the firm is in contract to acquire both the site at 80 South St. and a neighboring parcel at 163 Front St. from the Howard Hughes Corp.—the would-be developer of the nearby South Street Seaport.

A roughly 820,000 square foot building, with about 440,000 square feet of residential and 380,000 square feet of commercial space, can be developed on the combined site, which Howard Hughes bought in two separate deals and assembled together over the past year, according to city records.

Chinese real estate investors have increasingly poured money into the city. In late 2013, the Shanghai-based company Fosun, purchased the nearby downtown office building 1 Chase Manhattan Plaza for $725 million, subsequently renaming it 28 Liberty St. Earlier this week it won approval to create retail space it plans to spend $200 million building under the property.

Other Chinese firms have sought to build tall as well. Kaufu Properties reached a deal in recent weeks to buy a development site on East 60th Street that can potentially accommodate a 1,000-foot tall residential tower for more than $300 million, according to reports.

There has been a boom of ultra-tall towers in the city in general. As Crain’s reported August 5, developers Michael Stern and Joe Chetrit have struck a $90 million deal that will allow them to raise a tower in downtown Brooklyn that could be nearly as tall as the Empire State Building. That spire will be the tallest outside of Manhattan and possibly one of the highest in the entire city.

The site at 80 South St. has long been envisioned as a location for a soaring structure. Construction manager and developer Frank Sciame planned a unique-looking tower there designed by architect Santiago Calatrava, but eventually abandoned the complex project. CBRE brokers Darcy Stacom, Bill Shanahan and Paul Leibowitz handled the sale on behalf of the Howard Hughes.

A map highlighting the two acquired sites near South Street Seaport